18% GST applicable on Reimbursement of Basic Salary, ESIC, EPF, and Bonus

The Uttar Pradesh Authority of Advance Ruling (AAR) has ruled that the reimbursement of basic salary, ESIC, EPF, and the bonus is subject to 18 percent GST.

Broadcast Engineering Consultants India Limited, the applicant, is a Central Public Sector Enterprise under the Ministry of Information Broadcasting that was established on March 24, 1995 under the Companies Act, 2013, with the Government of India owning 100 percent of the equity share capital. Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Limited (Govt. Entity) awarded the applicant a contract for providing “skilled, semi-skilled, and unskilled” people for diverse work under the three circles of AGAR, JHABUA, and SHIVPURL.

The applicant has sought the advance ruling on the issue of whether we should charge GST @18% for taking reimbursement of expenses i.e., Basic Salary, ESIC, EPF, Bonus with a service charge or only on service charge for providing pure service by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution And, whether this services i.e. taking reimbursement of expenses for deployed Manpower is NIL rated supply in GST.

The Coram of Vivek Arya and Abhishek Chauhan has declared that GST of 18 percent (IGST) must be paid on reimbursement of expenditures, such as basic salary, ESIC, EPF, and bonus, together with the service charge.

The AAR also determined that GST is chargeable on services, such as taking payment for deployed Manpower expenditures.

“As can be seen, Section 15(1) clearly states that the transaction value of a supply of goods or services or both is the price actually paid or payable for the said supply of goods or services or both where the supplier and recipient of the supply are not related and the price is the sole consideration for the supply.” Furthermore, Section 15’s sub-section (2) delves into the goods that must be included in the value of supply, while Section 15’s sub-section (3) delves into the items that are not to be included in the value of supply,” according to the AAR.

To Read Ruling Download PDF Given Below: